Grasim Industries

The Directors have pleasure in presenting the 61st Annual Report and
 Audited Accounts of the Company for the year ended 31st March 2008.
 
 COMPANY’S STANDALONE FINANCIAL RESULTS
 
                                                         (Rs. in crores)
                                             2007-08          2006-07
 
 Gross Turnover                             11,551.6           9,572.7
 Gross Profit                                3,317.5           2,507.2
 Less: Depreciation                            353.3             317.9
 Profit before 
 extraordinary gain and tax expenses         2,964.2           2,189.3
 Write back of provision for diminution 
 in value of Investment / loans                 45.7              37.1
 Profit before Tax                           3,009.9           2,226.4
 Tax Expenses                                  962.3            (690.6)
 Net Profit after Tax from ordinary
 activities                                  2,047.6           1,535.8
 Extraordinary Items
 Profit on sale of shares of a 
 Subsidiary Company                            180.3              -
 Profit on transfer of textile units 
 at Bhiwani                                      4.7              -
 Net Profit after Tax                        2,232.6           1,535.8
 Add:
 Debenture Redemption Reserve written back      82.9              38.5
 Investment Allowance Reserve written back       -                 0.1
 Balance brought forward from Previous Year    965.3             878.4
 Surplus available for Appropriation         3,280.8           2,452.8
 Appropriation:
 General Reserve                             1,900.0           1,200.0
 Interim Dividend                                -               252.1
 Proposed Dividend                             275.0                -
 Corporate Tax on Dividend                      41.4              35.4
 Balance carried to Balance Sheet            1,064.4             965.3
                                             3,280.8           2,452.8
 
 Your Company has posted an impressive performance during the year under
 review. Its turnover increased by 21% at Rs.11,552 crores. Net Profit
 (before Extraordinary items) rose appreciably by 33% at Rs.2,048
 crores.  Cement and VSF businesses continued to be the growth drivers.
 
 The performance of the VSF business has been encouraging. Sales volumes
 recorded an increase of 8% at 269,781 tons. Despite the steep rise in
 input costs, Operating margins were higher due to realisations being up
 by 21% at Rs.103,316 per ton.
 
 The Cement business recorded a good performance. Both Production and
 Sales volumes grew by 7% at 15.36 Mn. tons and 15.54 Mn. tons
 respectively. The share of blended cement increased from 62% to 68%.
 Higher volumes and economies of scale contributed to profitability.
 However, the sharp hike in fuel cost led to lower operating margins.
 The Company continued its efforts to achieve over 100 percent capacity
 utilisation to meet the growing demand. RMC (Ready Mix Concrete)
 volumes expanded by 36%, buoyed by the rapid expansion in RMC network.
 The White Cement performance too has been good. Production was higher
 by 12% at 407,882 tons, while Sales volumes extended by 8% at 396,295
 tons.
 
 The Sponge Iron business posted improved performance. Production at
 562,000 tons reflected an increase of 7%.  Sales volumes, however, were
 lower by 2% at 557,187 tons. Realisations expanded by 24% owing to a
 surge in global scrap prices. The gains on this account were offset by
 higher prices of iron ore, naptha and propane. The non-availability of
 adequate quantity of natural gas and its pricing continued to remain an
 area of concern.
 
 The Chemical business put up a moderate performance. Production of
 caustic soda, which was affected in the corresponding year due to the
 breakdown of a captive power plant, grew by 38% at 188,537 tons. Sales
 volumes too moved in tandem, growing by 36% at 187,356 tons. But for
 the cost pressure on key inputs and fall in realisation, its
 performance would have been better.
 
 COMPANY’S CONSOLIDATED FINANCIAL RESULTS
 
 Your Company has posted an excellent performance for the year ended
 31st March 2008 on the consolidated basis as well. Higher capacity
 utilisation, improved sales volumes and realisations drove the enhanced
 performance.  Your Company’s consolidated revenue was at Rs.17,037
 crores, a rise of 20%. Net Profit (after minority share) rose
 appreciably by 46% at Rs.2,891 crores. Your Company’s performance has
 been driven by its VSF and Cement businesses and its subsidiaries.
 
 DIVIDEND
 
 Your Board has recommended a dividend of Rs.30 per share (last year:
 Rs.27.50), and seeks your approval for the same. The total outgo of the
 dividend to be paid to the shareholders will be Rs.316.44 crores
 (inclusive of Corporate Tax on Dividend), as against Rs.287.46 crores
 paid in the previous year.
 
 EMPLOYEE STOCK OPTION SCHEME (ESOS)
 
 Details of Employee Stock Options granted pursuant to Employee Stock
 Option Scheme 2006 (ESOS 2006), as also the disclosures in compliance
 with Clause 12 of the Securities and Exchange Board of India (Employee
 Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines,
 1999 are set out in the Annexure A’ to this Report.
 
 DEBENTURES AND TERM LOANS
 
 Your Company has raised long term loans (Rupee term loans and Foreign
 currency loans) aggregating Rs.581 crores during the year. The funds
 were utilized / will be utilized to meet the requirements of capital
 expenditure and other approved purposes. Debentures and term loans
 aggregating Rs.343 crores were repaid during the year.
 
 AWARDS & ACCOLADES
 
 Your Company’s pursuit of excellence has earned for it national and
 international honours. Some of the significant accolades received
 during the year were:
 
 Indias Best Managed Company in 2007-08 (Materials Sector) - Award by
 Business Today based on a study by Ernst & Young Forbes Asia’s Fabulous
 50 Companies - Grasim was adjudged one of the Best of Asia Pacific’s
 Biggest Listed Companies Safety Innovation Award by Quality Forum of
 The Institute of Engineers (India) bestowed on Staple Fibre Division,
 Nagda, Madhya Pradesh IMC Ramkrishna Bajaj National Quality Special
 Award for Manufacturing Excellence 2007 conferred upon Grasilene & Pulp
 Divisions, Harihar, Karnataka IMC Ramkrishna Bajaj National Quality
 Award for Manufacturing Excellence 2007 awarded to Vikram Ispat, Salav,
 Maharashtra State Energy Conservation Award - 2007 (Second Prize) & CII
 Energy Efficient Unit received by Cement South, Reddipalayam, Tamilnadu
 FICCIs Outstanding Achievement of Environmental Sustainability of
 Business Award - 2006-07 received by Cement South, Reddipalayam,
 Tamilnadu
 
 RESEARCH AND DEVELOPMENT
 
 To foster technical excellence and to maintain its leadership position
 through development of value added products, your Company continues to
 accord a high priority to R&D. A steadfast focus on Research and
 Development is an ongoing major driver of its leadership position in an
 increasingly competitive business environment.
 
 Introduction of new products, alternative technologies and improving
 the technical efficiencies is the focus of the Research & Development
 activities of your Company’s Pulp & Fibre Business. The Company has
 established R&D facilities for Plantations at Harihar, for Fibre at
 Nagda and for downstream value chain at Kharach. Your Company is now
 setting up a Pulp Research Institute at Harihar to complement Forest
 Research Institute for plantation and thus cater to the needs of the
 Company’s growing operations in Pulp & Plantations sector. To cater to
 the specific segments of consumer markets in Textile Sector, R&D work
 had been taken up at Birla Research Institute for several fibre
 variants such as anti-bacterial, perfumed, thermo regulating and flame
 retardant fibre. The trial production of these variants is being taken
 up for market establishment. In the area of application development,
 Textile Research & Application Development Centre (TRADC) was
 successful in developing innovative apparels / made-ups, generally
 produced in developed countries for production by Indian value chain
 and supply to international brands. Some innovative processing
 techniques were developed by the Company for the first time in the
 world, for use of solvent spun fibres in knit wears and also for
 developing self stretching fabrics without spandex. To promote use of
 non-wovens, a prototype plant with an unique technology developed for
 producing high performance non-wovens for repeat usage has been
 successfully tried. A semi- commercial plant for market development of
 these products is being established.
 
 Your Company’s Cement Business’ thrust is on increasing the use of
 industrial waste in the cement manufacturing process. Keeping this in
 mind, the Company’s research facility has developed processes for use
 of industrial wastes as raw mix component and maximizing fly ash
 absorption in PPC. In order to utilize limestone reserves to the full
 extent, R&D efforts were made towards utilization of limestone with
 high sulphur content. Efforts were also made towards development of
 methodology for determining fly ash content in PPC and compatibility
 interaction between cement and new generation super plasticizers. All
 these efforts have resulted in improving product quality and increasing
 customer satisfaction. Our future plans are towards development of new
 products and utilization of waste fuels.
 
 HUMAN RESOURCES
 
 At your Company, employees continue to be the key driving force of the
 organization and remain a strong source of our competitive advantage.
 We believe in aligning business priorities with the aspirations of
 employees leading to the development of an empowered and responsive
 human capital. We strive to create a work environment which encourages
 innovation and creativity.
 
 Through our strong Employer Brand, we were able to attract more than
 1030 employees to the Company who have become part of our competent and
 committed workforce. Appropriate measures are being planned by the
 Company to ensure talent retention and employee engagement.
 
 Your Company continued to support learning and development initiatives
 to enhance the functional as well as the behavioural competencies of
 our people. At ‘Gyanodaya’ - The Aditya Birla Institute of Management
 Learning, over 260 executives were enlisted for various high quality
 learning interventions. These programs supplemented with a combination
 of developmental assignments, classroom and web based training, has
 enabled our people to continuously learn, develop and grow.
 
 Our performance management system is primarily based on competencies
 and values. We closely monitor growth and development of top talent in
 your Company, to align personal aspirations with the organization
 purpose.
 
 CORPORATE GOVERNANCE
 
 Your Company fully adheres to the standards set out by the Securities
 and Exchange Board of India’s Corporate Governance practices and has
 implemented all of its stipulations. As required by Clause 49 of the
 Listing Agreement of Stock Exchanges, a detailed report on Corporate
 Governance forms part of this Annual Report.  The Company’s Statutory
 Auditor’s Certificate dated 29th April, 2008 in terms of Clause 49 of
 the Listing Agreement is annexed to and forms part of this Annual
 Report.
 
 DIRECTORS’ RESPONSIBILITY STATEMENT
 
 As stipulated in Section 217(2AA) of the Companies Act, 1956, your
 Directors subscribe to the “Directors’ Responsibility Statement” and
 confirm that:- i) in the preparation of the annual accounts, the
 applicable accounting standards have been followed along with proper
 explanation relating to material departures;
 
 ii) the directors have selected such accounting policies and applied
 them consistently and made judgments and estimates that are reasonable
 and prudent so as to give a true and fair view of the state of affairs
 of the Company at the end of the financial year and of the profit or
 loss of the Company for that period ;
 
 iii) the directors have taken proper and sufficient care of the
 maintenance of adequate accounting records in accordance with the
 provisions of this Act for safeguarding the assets of the Company and
 for preventing and detecting fraud and other irregularities;
 
 iv) the directors have prepared the annual accounts on a going concern
 basis.
 
 SUBSIDIARY COMPANIES
 
 The performance of UltraTech Cement Limited, your Company’s key
 subsidiary, was encouraging. Domestic Cement sales were higher at 14.25
 Mn. tons, an increase of 7%. However, exports of Cement and Clinker
 were down by 25% from 3.48 Mn. tons to 2.61 Mn. tons. Net Profit was
 higher by 29% at Rs.1,008 crores.
 
 During the year under review, your Company has transferred w.e.f. 1st
 October, 2007, the Company’s textile units at Bhiwani (Haryana), as a
 going concern, to its separate subsidiary, Grasim Bhiwani Textiles
 Limited (GBTL). In its first accounting period of six months ended 31st
 March 2008, GBTL has posted a net loss of Rs.  4.68 crores. Efforts are
 on to improve the performance of GBTL.
 
 Your Company has sold its entire holding of 7.58 crore equity shares
 representing 53.63% of the capital of Shree Digvijay Cement Company
 Limited (SDCCL) to Cimpor Inversiones S.A., Spain at Rs.42.50 per
 share.  With the completion of the said sale on 25th March, 2008, SDCCL
 has ceased to be a subsidiary of the Company. Profit of Rs.180 crores
 resulting from the stake sale has been shown in Profit & Loss Account
 as “Extraordinary item.
 
 The Statement pursuant to Section 212 of the Companies Act, 1956
 containing the details of the Company’s subsidiaries is attached.
 
 In terms of the approval granted by the Government of India, Ministry
 of Corporate Affairs, New Delhi u/s 212 (8) of the Companies Act, 1956
 vide its letter No. 47/207/2008 - CL- III dated 24th April, 2008,
 copies of the Balance Sheet, Profit & Loss Account, Reports of the
 Board and the Auditors of all the Subsidiary Companies have not been
 attached to the Balance Sheet of the Company as at 31st March, 2008.
 Pursuant to the said approval, a gist of the financial performance of
 the Subsidiary Companies is disclosed in this Annual Report.  However,
 the related detailed information of the annual accounts of the
 Subsidiary Companies will be made available to the holding and
 subsidiary companies’ investors seeking this information at any point
 of time. The annual accounts of the Subsidiary Companies will also be
 kept for inspection by any investor at the Registered Office of the
 Company and that of the Subsidiary Companies concerned.
 
 CONSOLIDATED FINANCIAL STATEMENTS
 
 The Consolidated Financial Statements have been prepared by your
 Company in accordance with the applicable Accounting Standards (AS-21,
 AS-23 and AS-27) issued by the Institute of Chartered Accountants of
 India and the same together with Auditors’ Report thereon form part of
 the Annual Report.
 
 PARTICULARS AS PER SECTION 217 OF THE COMPANIES ACT, 1956
 
 In accordance with the provisions of Section 217(2A) read with
 Companies (Particulars of Employees) Rules, 1975, the names and other
 particulars of employees are to be set out in the Directors’ report, as
 an addendum thereto. However, as per the provisions of Section
 219(1)(b)(iv) of the Companies Act, 1956, the Report and accounts as
 set out therein, are being sent to all members of the Company excluding
 the aforesaid information about the employees. Any member, who is
 interested in obtaining such particulars about employees, may write to
 the Company Secretary at the Registered Office of the Company, and the
 same will be sent by post.
 
 Additional information on Conservation of Energy, Technology Absorption
 and Foreign Exchange Earnings and Outgo, stipulated under Section
 217(1)(e) of the Companies Act, 1956 is set out in a separate
 statement, attached to this report (Annexure ‘B’) and forms part of it.
 
 DIRECTORS
 
 Mr. S.B. Mathur resigned from the Board, effective 22nd January, 2008,
 consequent to the withdrawal of his nomination by Life Insurance
 Corporation of India. The Board places on record its sincere
 appreciation of the valuable services rendered by him during his tenure
 as a Director of the Company.
 
 Mr. B.V. Bhargava, Mr. Kumar Mangalam Birla and Mr. M.L. Apte retire
 from office by rotation and being eligible, offer themselves for
 re-appointment. A brief resume, expertise and details of other
 directorships of these Directors forms part of the report on Corporate
 Governance Section.
 
 AUDITORS
 
 The Board, on the recommendation of the Audit Committee, has proposed
 that M/s. G.P. Kapadia & Co., Chartered Accountants, Mumbai, be
 re-appointed as the Statutory Auditor of the Company and to hold office
 till the conclusion of the next Annual General Meeting of the Company.
 M/s. G.P. Kapadia & Co., Chartered Accountants, Mumbai have forwarded
 their certificate to the Company, stating that their re-appointment, if
 made, will be within the limit specified in that behalf in Sub-section
 (1B) of Section 224 of the Companies Act, 1956.
 
 M/s. A.F. Ferguson & Co., Chartered Accountants, Mumbai, were appointed
 as the Branch Auditors of the Company to audit the Accounts in respect
 of the Company’s Cement business consisting of all Cement manufacturing
 units, Grinding units, Ready Mix Concrete units, Cement Marketing
 Division and White Cement Division from the conclusion of the previous
 Annual General Meeting until the conclusion of the ensuing Annual
 General Meeting. M/s. A.F. Ferguson & Co., have expressed their
 inability to be re-appointed as Branch Auditors of the Company. The
 Board, on the recommendation of the Audit Committee, has proposed that
 M/s. Deloitte Haskins & Sells, Chartered Accountants, Mumbai, be
 appointed as the Branch Auditors of the Company to audit the Accounts
 in respect of the Company’s Cement business consisting of all Cement
 manufacturing units, Grinding units, Ready Mix Concrete units, Cement
 Marketing Division and White Cement Division and to hold office till
 the conclusion of the next Annual General Meeting of the Company.
 
 The Board, on the recommendation of the Audit Committee, has also
 proposed that M/s. Vidyarthi & Sons, Chartered Accountants, Gwalior, be
 re-appointed as the Branch Auditor of Vikram Woollens Division of the
 Company.
 
 Your Directors request you to appoint the auditors for the current year
 and fix their remuneration.
 
 COST AUDITORS
 
 In pursuance of Section 233-B of the Companies Act, 1956, your
 Directors have appointed M/s R. Nanabhoy & Co., Mumbai, M/s R.J. Goel &
 Co., Delhi, M/s K.G. Goel & Co., Jaipur and M/s N.D. Birla & Co.,
 Ahmedabad as the Cost Auditors to conduct the Cost Audit of Pulp &
 Fibre, Caustic Soda, Sulphuric Acid, Cotton Textile and Cement for the
 year 2008-09, subject to the approval of the Central Government.
 
 APPRECIATION
 
 Your Directors wish to place on record their appreciation of the
 dedication and commitment of your Company’s employees to the growth of
 your Company. Their unstinted support has been and continues to be
 integral to your Company’s ongoing success. Your Directors wish to
 thank the Central and State Governments, its bankers, shareholders and
 business associates for their continued co-operation and support.
 
                                         For and on behalf of the Board
 
                                                 Kumar Mangalam  Birla 
 Mumbai, 29th April, 2008                                     Chairman